Oil’s rally is longest this year as US drilling slows

Noe Olvera loads maneuvers a section of casing to be put downhole on Trinidad Rig 433 on Nov. 2, 2016, in Midland County.

Noe Olvera loads maneuvers a section of casing to be put downhole on Trinidad Rig 433 on Nov. 2, 2016, in Midland County.

Photo: James Durbin/Reporter-Telegram

Photo: James Durbin/Reporter-Telegram

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Noe Olvera loads maneuvers a section of casing to be put downhole on Trinidad Rig 433 on Nov. 2, 2016, in Midland County.

Noe Olvera loads maneuvers a section of casing to be put downhole on Trinidad Rig 433 on Nov. 2, 2016, in Midland County.

Photo: James Durbin/Reporter-Telegram

Oil’s rally is longest this year as US drilling slows

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Oil extended the longest run of gains this year, closing above $47 a barrel, as U.S. drilling slowed after a record expansion.

West Texas Intermediate futures rose as much as 2.3 percent in New York, adding to an 8.3 percent gain the previous seven sessions. Meanwhile, Brent, the global benchmark, is posting the longest rally since 2012. The increases come as U.S. drillers targeting crude cut the number of active rigs for the first time in 24 weeks. Before that, the count had climbed to the highest level since April 2015, according to Baker Hughes Inc. data on Friday.

“A surprise fall in U.S. production in April and oil rigs last week may ease concerns that U.S. crude production is ramping up too aggressively,” Giovanni Staunovo, an analyst at UBS Group AG, wrote in a research note. “OPEC compliance and lower U.S. oil inventories could prompt higher oil prices in the coming weeks.”

While prices surged last week, oil in New York and London still posted a monthly loss in June after tumbling into a bear market on concerns that rising global supply will counter cuts from the Organization of Petroleum Exporting Countries and its partners.

WTI for August delivery advanced $1.03 Monday to settle at $47.07 a barrel on the New York Mercantile Exchange. The contract gained $1.11 to $46.04 on Friday to the highest since June 13.

OPEC member Libya, meanwhile, is adding more oil to the market as it restarts fields that are exempt from the group's production curbs. The country's output climbed to more than 1 million barrels a day for the first time in four years, according to a person with direct knowledge of the situation. State National Oil Corp. Chairman Mustafa Sanalla said in April he wanted to boost national output to 1.1 million barrels a day by August.

In the U.S., drillers reduced the number of rigs by two to 756, snapping the longest stretch of gains in at least three decades, according to Baker Hughes.

“A further pillar of price support came as the relentless surge in U.S. drilling activity took a break,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. It “suggests some producers are starting to feel the pinch from the recent slide in prices.”